Retail CFOs worried about economy and healthcare costs

NEW YORK — Nearly half (49%) of retail CFOs expect their capital expenditures will increase in the next 12 months, a 19-point uptick that leads all industries, and 29% expect to consider additional financing for expenditures, also leading all industries. according to GE Capital’s latest semi-annual “U.S. Mid-Market CFO Survey.” (Retail respondents have revenues of $150 million and an employee count of 1,235, on average. Data comparisons are against the GE Capital Mid-Market’s CFO Survey executed in first quarter 2012.

At the same time, retail CFOs have the least positive sentiment across all industries on the current state of their industry, the U.S. economy and the global economy.

“Retail CFOs continue to voice their concern for the state of the global and U.S. economies,” said Jim Hogan, senior managing director for GE Capital, Corporate Retail Finance. “While they have tempered their expectations for growth in the industry, retail CFOs remain optimistic with regard to revenue expectations compared to their peers in other industries.”

Although down by 13 points, 61% of retail CFOs expect their company’s revenues to increase this year over last year. They are the second-most optimistic of all industries regarding revenue growth. They are less optimistic when it comes to profitability; 24% expect profits to increase this year versus last year, a 14-point drop. Thirty-three expect profits to decline, an increase of 17 points.

The factor that will have the most significant impact on business performance over the next 12 months is health healthcare costs (80%, up 14 points). Labor costs, the previous top issue, are now the second-most significant factor impacting business performance, cited by 75% down five points.

In other findings specific to retail CFOs:

Twenty-seven percent say their company’s financing needs (such as loans, leases, and other credit facilities) will increase in the next 12 months. This is the highest percentage across industries.

Hiring – Sixty-one percent expect to hire in the next 12 months, down 11 points. They anticipate increasing their workforce by 5%.

Sixty percent expect the discount category to be the biggest area of consumer spending this year, down 12 points. Eighteen percent chose the aspirational category as the biggest area of consumer spending (up from 12%) and 14% chose the luxury category (up from 12%).

Sixty-three percent expect inventory levels to remain the same this year, while 25% said they would increase, relatively unchanged. The average expected inventory increase through the remainder of 2012 is 18%, up eight points.

INSIGHTS

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